Global retailing

Let the shopping begin

What are the prospects of Christmas cheer for retailers?

“BLACK FRIDAY”, the day after Thanksgiving, is traditionally the start of the busiest shopping season in America. This year is no different. Shoppers on Friday November 24th were expected to race to the malls to snap up this season's hottest gifts. The day is “black” not because of the misery of queues and crowds, but because it marks the moment when retailers are supposed to move from the red (indicating losses) to the black (indicating profits). But retailers in America are already in a festive mood: the month before Christmas is forecast to be an especially lucrative period.

In the next few weeks consumer spending will increase by 7% in America, compared with last year, according to a consumer survey by Deloitte, a consultancy. Shoppers are cheerful about the economy though not as a result of bigger spending power (the recent cut in the price of petrol has not had much impact on spending habits yet). But the ranks of American millionaires are growing, boosting sellers of luxury goods such as Moët Hennessy Louis Vuitton and PPR, two big luxury-goods conglomerates. Investors are picking up on consumers' increased confidence. Since the beginning of September, the S&P Retail Index has far outperformed the S&P 500, a broad stock-market index.

The festive spirit is not so evident on the other side of the Atlantic. Some parts of Europe are more confident this year than last. Shoppers in strong economies such as Ireland, Spain, Britain and in Scandinavia, as well as new middle-class consumers in Russia and in other emerging economies, are planning to spend as much as 18% more on celebrations, compared with last year. But in Germany and Italy there is less to cheer. Spending is predicted to fall by as much as 6% this year, as shoppers close purses and tighten belts.

Total spending differs considerably between countries, reflecting both tradition and relative economic wealth. A typical Irish household is expected to spend €1,339 this year ($1,734), rather more even than the average American family and more than twice as much as a French one (see chart). That may be because the Irish expect a big family party with lots of children and gifts, while the French choose a good dinner of oysters and champagne on the 24th of December.

One trend is shared by everyone: consumers increasingly want speed and convenience. Europeans have taken to gift vouchers, which have long been popular in America. These are predicted to be, again, the number one present in America, and should become the fifth and eighth most popular presents on the continent and in Britain, respectively.

And the internet is ever more popular. ComScore Networks, an internet information provider, says online retailers expect the biggest sales ever on “Cyber Monday”, the Monday after the Thanksgiving holiday, when millions of Americans take advantage of high-speed internet in their offices to hunt for presents. During the first 19 days of November, total retail spending online reached $6.35 billion, a 23% increase compared with the corresponding period in 2005. ComScore predicts that online retail consumer-spending for the two months to Christmas will exceed $24 billion, up by almost a quarter compared with last year.

Competition on prices has become much stiffer. Wal-Mart, the world's biggest retailer, unveiled its holiday deals weeks before Black Friday, slashing prices on toys, electronics and home appliances. The firm then cut more prices on Black Friday itself. Consumers increasingly use the internet to compare prices. According to Deloitte 70% of American shoppers will use the internet for some of their Christmas shopping, compared with 55% of Europeans.

Some traditions do change, however. Last year the California-based “Committee to Save Merry Christmas” launched a campaign for shoppers to boycott department stores for changing their advertising from “Merry Christmas” to “Season's Greetings”. The campaign had some effect: Macy's, a chain of department stores, returned “Merry Christmas” to its advertising and shop displays. But Macy's is an exception. Sears, another chain of department stores targeted by the campaign, and other retailers increasingly use the politically-correct, all-inclusive “Happy Holidays”.